A payment is the transfer of wealth from one party A party is a person or group of persons that compose a single entity which can be identified as one for the purposes of the law (such as a person or company) to another. A payment is usually made in exchange for the provision of goods In macroeconomics and accounting, a good is contrasted with a service. In this sense, a good is defined as a physical product, capable of being delivered to a purchaser and involves the transfer of ownership from seller to customer, say an apple, as opposed to an (intangible) service, say a haircut. A more general term that preserves the, services A service is the intangible equivalent of a good. Service provision is often an economic activity where the buyer does not generally, except by exclusive contract, obtain exclusive ownership of the thing purchased. The benefits of such a service, if priced, are held to be self-evident in the buyers willingness to pay for it. Public services are or both, or to fulfill a legal obligation.

The simplest and oldest form of payment is barter Barter is a method of exchange by which goods or services are directly exchanged for other goods or services without using a medium of exchange, such as money. It is usually bilateral, but may be multilateral, and usually exists parallel to monetary systems in most developed countries, though to a very limited extent. Barter usually replaces money, the exchange of one good or service for another. In the modern world, common means of payment by an individual include money Money is any object that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally, a standard of deferred payment, cheque A cheque or check is a piece of paper (usually) that orders a payment of money. The person writing the cheque, the drawer, usually has a chequing account where their money is deposited. The drawer writes the various details including the money amount, date, and a payee on the cheque, and signs it, ordering their bank, know as the drawee, to pay, debit A direct debit or direct withdrawal is an instruction that a bank account holder gives to his or her bank to collect an amount directly from another account. It is similar to a direct deposit but initiated by the beneficiary. It is also called pre-authorized debit or pre-authorized payment (PAP), credit Credit is the provision of resources by one party to another party where that second party does not reimburse the first party immediately, thereby generating a debt, and instead arranges either to repay or return those resources (or material(s) of equal value) at a later date. It is any form of deferred payment. The first party is called a, or bank transfer Banks collect payment for the service from the sender as well as from the recipient. The sending bank typically collects a fee separate from the funds being transferred, while the receiving bank and intermediate banks through which the transfer travels deduct fees from the money being transferred so that the recipient receives less than when the, and in trade Trade is the voluntary exchange of goods, services, or both. Trade is also called commerce or transaction. A mechanism that allows trade is called a market. The original form of trade was barter, the direct exchange of goods and services. Later one side of the barter were the metals, precious metals , bill, paper money. Modern traders instead such payments are frequently preceded by an invoice An invoice or bill is a commercial document issued by a seller to the buyer, indicating the products, quantities, and agreed prices for products or services the seller has provided the buyer. An invoice indicates the buyer must pay the seller, according to the payment terms. The buyer has a maximum amount of days to pay these goods and are or result in a receipt A receipt is a written acknowledgement that a specified article or sum of money has been received as an exchange for goods or services. The receipt acts as the title to the property obtained in the exchange[citation needed]. However, there are no arbitrary limits on the form a payment can take and thus in complex transactions between businesses, payments may take the form of stock The stock or capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors. Stock is distinct from the property and the assets of a business which may fluctuate in or other more complicated arrangements.

In law, the payer is the party making a payment while the payee is the party receiving the payment.

Payment methods

There are two types of payment methods; exchanging A financial transaction is an event or condition under the contract between a buyer and a seller to exchange an asset for payment. In accounting, it is recognized by an entry in the books of account. It involves a change in the status of the finances of two or more businesses or individuals and provisioning In financial accounting, provision is a word that creates an ambiguous account title. In U.S. GAAP, provision means an expense, while in IFRS, International Financial Reporting Standards, it means a liability. So, in the U.S., Provision for Income Taxes means the same thing as Income Tax Expense, while under IFRS, Provision for Income Taxes means. Exchanging is to change coin Coins are usually metal or a metallic material and sometimes made of synthetic materials, usually in the shape of a disc, and most often issued by a government. Coins are used as a form of money in transactions of various kinds, from the everyday circulation coins to the storage of large numbers of bullion coins. In the present day, coins and, money Money is any object that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally, a standard of deferred payment and banknote A banknote is a kind of negotiable instrument, a promissory note made by a bank payable to the bearer on demand, used as money, and in many jurisdictions is legal tender. Along with coins, banknotes make up the cash or bearer forms of all modern fiat money. With the exception of non-circulating high-value or precious metal commemorative issues, in terms of the price. Provisioning is to transfer money from one account to another. In this method a third party must be involved. Credit card A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services. The issuer of the card grants a line of credit to the consumer from which the user can borrow money for payment to a merchant or as a cash advance to the, debit card A debit card is a plastic card that provides an alternative payment method to cash when making purchases. Functionally, it can be called an electronic cheque, as the funds are withdrawn directly from either the bank account, or from the remaining balance on the card. In some cases, the cards are designed exclusively for use on the Internet, and so, money transfers, and recurring cash or ACH (Automated Clearing House Automated Clearing House is an electronic network for financial transactions in the United States. ACH processes large volumes of credit and debit transactions in batches. ACH credit transfers include direct deposit payroll and vendor payments. ACH direct debit transfers include consumer payments on insurance premiums, mortgage loans, and other) disbursements are all electronic payments methods. Electronic payments technologies are magnetic stripe card, smartcard A smart card, chip card, or integrated circuit card , is any pocket-sized card with embedded integrated circuits. There are two broad categories of ICCs. Memory cards contain only non-volatile memory storage components, and perhaps dedicated security logic. Microprocessor cards contain volatile memory and microprocessor components. The card is, contactless card Proximity card is a generic name for contactless integrated circuit devices used for security access or payment systems. It can refer to the older 125 kHz devices or the newer 13.56 MHz contactless RFID cards, most commonly known as contactless smartcards and mobile handset On a telephone, the handset is a device the user holds to the ear to hear audio. Modern handsets typically contain a microphone as well, but in early telephones the microphone was mounted on the phone itself, which often was attached to a wall at a convenient height for talking. Handsets on such phones were called receivers, a term often applied. Mobile handset based payments are called mobile payments Mobile payment is a new and rapidly-adopting alternative payment method – especially in Asia and Europe. Instead of paying with cash, check or credit cards, a consumer can use a mobile phone to pay for wide range of services and digital or hard goods such as:.

Parties involved

Payments may be classified by the number of parties involved to consummate a transaction. For example, a credit card A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services. The issuer of the card grants a line of credit to the consumer from which the user can borrow money for payment to a merchant or as a cash advance to the transaction in the United States requires a minimum of four parties (the purchaser, the seller, the issuing bank An issuing bank is a bank that offers card association branded payment cards directly to consumers, and the acquiring bank An acquiring bank is the bank or financial institution that accepts credit and or debit card payments for products or services on behalf of a merchant. The term acquirer indicates that the bank accepts or acquires transactions performed using a credit card issued by all banks within the card association scheme. The best known (credit) card). A cash Cash refers to money in the physical form of currency, such as banknotes and coins. The word has various claims for sources. Some claim that the word comes from the modern French word caisse, which means "money box", coming from Provençal word caissa, from the Italian cassa, from the Latin capsa which means "box". In the 18th payment requires a minimum of three parties (the seller, the purchaser, and the issuer of the currency). A barter payment requires a minimum of two parties (the purchaser and the seller).

Payment providers

The infrastructure and electronic clearing methods are formed by the payment provider. Global credit card payment providers are Visa Visa Inc. is an American global payments technology company headquartered in Foster City, California. Visa connects consumers, businesses, financial institutions and governments in more than 200 countries and territories, enabling them to use digital currency instead of cash and checks. The company facilitates the processing of transactions on and Mastercard MasterCard Worldwide is an American multinational corporation with its headquarters in the MasterCard International Global Headquarters in Harrison, New York, United States. Throughout the world, its principal business is to process payments between the banks of merchants and the banks of purchasers that use its "MasterCard" brand debit. Japan Credit Bureau Japan Credit Bureau, usually abbreviated as JCB, is a credit card company based in Tokyo, Japan. Its English name is JCB Co., Ltd. (JCB) is a payment provider for Japanese market. Maestro Maestro is a multi-national debit card service owned by MasterCard, and was founded in 1990. Maestro cards are obtained from associate banks and can be linked to the card holder's current account, or they can be prepaid cards. The cardholder presents the card at the point of sale and this is swiped through the terminal by the assistant or the and Cirrus Cirrus is a worldwide interbank network operated by MasterCard Worldwide, and was founded in 1986. It links MasterCard, Maestro, Diners Club credit, debit and prepaid cards to a network of over 1,000,000 ATMs in 93 countries are international debit card payment providers.

Global payments market

In 2005, an estimated $40 trillion globally passed through some type of payment system. Roughly $12 trillion of that was transacted through various credit cards, mostly the 21,000 member banks of VISA Visa Inc. is a global payments technology company headquartered in San Francisco, California. Visa connects consumers, businesses, financial institutions and governments in more than 200 countries and territories, enabling them to use digital currency instead of cash and checks. The company facilitates the processing of transactions on behalf of and MasterCard MasterCard Worldwide is an American multinational corporation with its headquarters in the MasterCard International Global Headquarters in Harrison, New York, United States. Throughout the world, its principal business is to process payments between the banks of merchants and the banks of purchasers that use its "MasterCard" brand debit. Processing payments, including the extending of credit, produced close to $500 billion in revenue.^[1]

Debit cards

In the U.S., debit cards A debit card is a plastic card that provides an alternative payment method to cash when making purchases. Functionally, it can be called an electronic cheque, as the funds are withdrawn directly from either the bank account, or from the remaining balance on the card. In some cases, the cards are designed exclusively for use on the Internet, and so are the fastest growing payment technology. In 2001, debit cards accounted for 9 percent of all purchase transactions, and this is expected to double to 18.82 percent in 2011^[2]

Checks

Historically, checks A cheque or check is a piece of paper (usually) that orders a payment of money. The person writing the cheque, the drawer, usually has a chequing account where their money is deposited. The drawer writes the various details including the money amount, date, and a payee on the cheque, and signs it, ordering their bank, know as the drawee, to pay have been one of the primary means of payment for purchasing goods and services in the U.S. In 2001, checks accounted for 25 percent of the U.S.-based payment mix; in 2006, this is projected at 17 percent.^[3]

Determining actual payment for U.S. tax purposes

For tax purposes, it is important to determine the timing of actual payment and whether it qualifies as a deduction in a taxpayer's calculation of taxable income Taxable income is the portion of income that is the subject of taxation according to the laws that determine what is income and the taxation rate for that income. Generally, taxable income refers to an individual's gross income, adjusted for various deductions allowable by statute. The main questions put by most individuals in any jurisdiction are.

Cash Cash refers to money in the physical form of currency, such as banknotes and coins. The word has various claims for sources. Some claim that the word comes from the modern French word caisse, which means "money box", coming from Provençal word caissa, from the Italian cassa, from the Latin capsa which means "box". In the 18th payments occur at the time of payment. This is the easy case, but payments in other forms can be trickier. Payment also occurs when the taxpayer transfers property or performs services in lieu of making a cash payment.^[4] Payment by check is deemed to occur when the check is delivered, as long as the check is honored on presentation by the payee. This rule is enforced even where presentation does not occur until the next taxable year, and even though the taxpayer could stop payment on the check in the meantime.^[5] Postdated checks In banking, postdated refers to checks which have been written by the drawer for a date in the future. In the United States postdated items are described in Article 3, Section 113 of the Uniform Commercial Code. Postdated checks are often used in conjunction with payday loans, however, are not considered payment when delivered.^[6] Generally, payment by credit card A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services. The issuer of the card grants a line of credit to the consumer from which the user can borrow money for payment to a merchant or as a cash advance to the occurs at the point of the sale and not when the taxpayer is billed by the credit card company or when the taxpayer pays the bill.^[7]

See also

• Accounting Accountancy is the art of communicating financial information about a business entity to users such as shareholders and managers. The communication is generally in the financial´s form statements that show in money terms the economic resources under the control of management; the art lies in selecting the information that is relevant to the user
• APACS The UK Payments Administration Ltd. , is the trade body that conglomerates a group of sub-entities that gives banks, building societies and card issuers a forum where they can work together on non-competitive issues. It manages the payments that businesses and individuals in the UK need to make, covering cash, credit and debit cards, cheques, and (The UK Payments Association)
• Business A business is a legally recognized organization designed to provide goods or services, or both, to consumers, businesses and governmental entities. Businesses are predominant in capitalist economies. Most businesses are privately owned. A business is typically formed to earn profit that will increase the wealth of its owners and grow the business
• Commerce Commerce is a division of trade or production which deals with the exchange of goods and services from producer to final consumer OR commerce is the exchange of goods and services from the point of production to the point of consumption to satisfy human wants. It comprises the trading of something of economic value such as goods, services,
• Financial transaction A financial transaction is an event or condition under the contract between a buyer and a seller to exchange an asset for payment. In accounting, it is recognized by an entry in the books of account. It involves a change in the status of the finances of two or more businesses or individuals
• Money Money is any object that is generally accepted as payment for goods and services and repayment of debts in a given country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally, a standard of deferred payment
• Trade Trade is the voluntary exchange of goods, services, or both. Trade is also called commerce or transaction. A mechanism that allows trade is called a market. The original form of trade was barter, the direct exchange of goods and services. Later one side of the barter were the metals, precious metals , bill, paper money. Modern traders instead

Footnotes

1. ^ McKinsey and Company, 2006
2. ^ The Nilson Report, Issue 761, April 2002
3. ^ The Nilson Report
4. ^ See Donaldson, Samuel A., Federal Income Taxation of Individuals: Cases, Problems and Materials, 734 (2nd. Ed. 2007).
5. ^ Estate of Spiegel v. Commissioner, 12 T.C. 524 (1949).
6. ^ Griffin v. Commissioner, 49 T.C. 253 (1967).
7. ^ Revenue Ruling 78-38, 1978-1 C.B. 67.

References

• Schaeffer, Mary S.: New Payment World, John Wiley & Sons 2007
• Schaeffer, Mary S.: Controller & CFO Guide to Accounts Payable, John Wiley & Sons 2007
• Schaeffer, Mary S.: Accounts Payable & Sarbanes Oxley, John Wiley & Sons 2006

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